Stock Market Outlook: S&P 500 Returns When the Fed Cuts Rates

US: Nonfarm payrolls increased 224K in June vs. 160K expected

June jobs report: Strong hiring in June with 224,000 new jobs across U.S.

The Dow finished Friday with a almost 44-point loss after the government reported that 224,000 jobs were added last month - much better than expected.

It showed that 224,000 jobs were created in June, many more than the 160,000 that economists had forecast.

U.S. construction employment rose by 21,000 jobs last month after gaining 5,000 in May, while government payrolls rebounded by 33,000 after shedding 11,000 jobs in May. In June, job gains occurred among couriers and messengers (+7,000) and in air transportation (+3,000).

"So really your only hope, at least for the near term, is that the Fed remains accommodative and maybe even gets a little bit more accommodative until we get a resolution to a lot of the tariff and trade issues".

The unemployment rate ticked up from its 50-year low of 3.6% to 3.7%, the Labor Department said Friday. However, equities have rallied since June as the Fed and other global central banks signaled they were becoming more dovish. Parcel companies led the way among carriers during the month, adding 6,500 workers in June.

"Today's jobs report shows the USA economy continues to create jobs at a strong pace even as we enter the longest period of economic expansion on record", said Tony Bedikian, managing director and head of global markets at Citizens Bank in an email.

The data, by many accounts, shows the US economy is humming along with little to no inflation lowering the view that the Fed will need to cut rates this year. If the macro-economy truly needs as much monetary stimulus as markets are now pricing, investors could be in for a rude awakening when the longest business cycle in history officially comes to an end.

"We think the Fed is still on track for a 25 basis points cut given trade uncertainty and the steady downtrend in business sentiment", said Andrew Schneider, a USA economist at BNP Paribas Securities in NY.

The U.S. Treasury will sell $36 billion of three-month bills and $36 billion of six-month bills on Monday. Freight transportation and warehousing also performed well during the month, though continued struggles in rail and water transportation employment contributed almost nothing to the monthly gain.

Health care, industrial, technology and consumer staples stocks accounted for much of the selling. Policymakers have also been pushing to slowly raise rates from their historic lows, where they've remained since the 2008 financial crisis, in order to provide more cushion in case of another recession.

The surge in hiring is despite the sector struggling with an inventory bulge, concentrated in the automotive industry, trade tensions, design troubles at planemaker Boeing and slowing global growth.

The government sector was a major source of hiring, adding 33,000 jobs in June. But America's manufacturing sector is slowing along with construction spending.

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